Washington (CNN) - A Democratic source familiar with the talks tells CNN they have hit a “major setback” because Republicans are now insisting that any fiscal cliff deal include “chained CPI," which Democrats consider a “poison pill.”

The Democratic source says they understand the president offered this in talks with House Speaker John Boehner, but Democrats say that was in the context of a larger deal - in exchange for changes to the way the debt ceiling is approached - which is not in the plan anymore.Follow @politicalticker

Chained CPI would change the way Social Security benefits are adjusted for inflation, effectively meaning Social Security recipients would receive less money over the years.

This Democratic source did not want to be identified because of the closed nature of the talks, but was clearly giving the information to CNN to make public the Democrats’ point of view and push the Republicans to give in on this high stakes issue.

The source also told CNN that Democrats are currently “going outside their comfort zone” in these talks with regard to tax rates - keeping tax rates in place for higher income households than the president wants. The source also said Democrats are negotiating with Republicans on extending the current lower estate tax rate, a big issue for many Republicans as well as moderate Democrats.

A Senate Republican leadership source responded by pointing to the president’s comments in an interview that aired Sunday suggesting he is willing to look at chained CPI “in pursuit of strengthening Social Security for the long term.”

Democrats, however, do not see the mini-deal they’re talking about now as a long term prospect with regard to entitlements.

This source further said that they will decide by early Sunday evening whether to pull the plug and put the fallback bill on the floor, a bill that keeps tax rates in place for those making less than $250,000, fixes the Alternative Minimum Tax, includes the so-called Medicare doc fix, and extends unemployment benefits.

Republican Leader Mitch McConnell said on the Senate floor Sunday that he has placed a call to Vice President Joe Biden to see if "he could help jump-start negotiations on his side." Two sources confirmed that McConnell and Biden have spoken.

"I'm interested in getting a result here," he said. "There's no single issue that remains an impossible sticking point. The sticking point appears to be willingness, an interest, or frankly the courage to close the deal. I want everyone to know I'm willing to get this done, but I need a dance partner."

Following his remarks, Senate Majority Leader Harry Reid spoke on the floor, saying he and his staff haven't been able to come up with a counterproposal.

"I had a conversation with the president and at this stage we're not able to make a counteroffer," Reid said.

As for McConnell's comments about working with Biden, Reid said, "I wish them well."

The majority leader added he will continue to work on another offer and will be able to make a new pitch "perhaps as the day wears on."

"I will say this: I think that the Republican leader has shown absolute good faith," Reid said. "It's just that we're apart on some pretty big issues."

Not long after, Reid told reporters that "they're making progress."

"At this stage we don’t have a deal and that’s an understatement," he added.

soundoff(126 Responses)

MSpencer

Those of us who receive Social Security benefits are not receiving handouts. Take a look at your own paycheck and you'll see the same deduction for Social Security that we saw subtraced from our own paychecks over decades of work. This year, I expect to net an additional thirty dollars. Meanwhile, my same tiny one-bedroom apartment has gone up thirty-six dollars and my Medicare gap insurance has gone up five; net/net my income is down eight dollars a month, even with the current "more generous" method of inflation adjustment. Eight dollars a month. Sounds like a very, very little? But projecting that over decades using the so-called Chained CPI which will result in even lower increases to Social Security over the coming years. This is the Republicans bright idea. Mow down Seniors while sheltering the tax rates of higher income households? Republicans, we Seniors may not have all our faculties but I can assure you of this: When we complete our ballots over the decades to come, we will remember with certainty which party it was that pushed such a change...and tried to hold the Democrats hostage by demanding it's usage or else no holding back from the Fiscal Cliff.

December 30, 2012 02:47 pm at 2:47 pm |

shaysite

Instead of chained CPI-for all, we should apply it only to those who don't need Social Security.

December 30, 2012 02:47 pm at 2:47 pm |

Gregory Faith

They put CPI on the table? Really? NOW?

December 30, 2012 02:49 pm at 2:49 pm |

goat

If no deal is made, everyone loses.

December 30, 2012 02:50 pm at 2:50 pm |

Allinstride

Here comes the cliff!

December 30, 2012 02:50 pm at 2:50 pm |

Ray E. (Georgia)

Is anyone surprised. This is the results of 75 years of liberal politics. Total Failure.

December 30, 2012 02:53 pm at 2:53 pm |

j majorino

Just one question. What else can the republicans do to old or poor people? They want into the last two big piggy banks ( social security and Medicare. It's no secret the republicans favor the rich but how many houses and cars and vacations do you need? It's time to leave the hard working Americans along and stop trying to take what we paid for all our working lives. Send a message and vote democrat across the board. We want our country back and will take the house back. It will be many years before we see another republican president. Shame on the party for trying to make the rest of us pay for your way of life. Slavery has been gone for many years, time to pay your own way and stop taking advantage of the hard workers.

December 30, 2012 02:56 pm at 2:56 pm |

CanadaONE

Breaking News

NO DEAL!!

Republican advised Canadian politician

December 30, 2012 02:57 pm at 2:57 pm |

pjoe

Unless we do something about baseline-budgeting, nothing done here will matter. We may as well default now.

December 30, 2012 02:57 pm at 2:57 pm |

Randy, San Francisco

Reminder to the GOP/Tea Party: Your man lost the election in November. Your message was rejected by a majority of Americans. Many things on the GOP/Tea Party wish list should be discussed when a larger deal is negotiated in 2013. Seems the national GOP/Tea Party will go the way of the California Republican Party, as a permanent minority party with no relevancy to the poltical process.

December 30, 2012 02:59 pm at 2:59 pm |

What

The 'major setback' is that the GOP hasn't been destroyed yet.

December 30, 2012 02:59 pm at 2:59 pm |

Gurgyl

Folks, drive these GOP animals away–no cuts to SS, Medicare. Period. Are these idiots brain-dead??? March to Washington–drive them out–pathetic GOP idiots are playing drama.

December 30, 2012 03:00 pm at 3:00 pm |

T Brannan

U. S. Tax Revenue $2,170,000,000,000
Federal Budget 3,820,000,000,000
New Debt 1,650,000,000,000
National Debt 14,271,000,000,000
Recent Budget Cuts 38,500,000,000
Remove 8 zeroes and make it a family budget
Annual Family Income 21,700
Money the family spent 38,200
New debt on the credit card 16,500
Outstanding Debt 142,710
Total Budget cuts so far $38.50

December 30, 2012 03:01 pm at 3:01 pm |

Ken

Ya had to see this coming A pox on both thier houses.

December 30, 2012 03:04 pm at 3:04 pm |

jim

going over the cliff is the only way to balance the budgit. They are both right we need to Increase revenue and cut spending and get our house together. Cuts include defense spending. Just think what we could do with all the interest money we are paying out. If you borrow the money you are going to pay twice as much as it would cost with cash

December 30, 2012 03:06 pm at 3:06 pm |

Chris

Obama is proving that he is out to bury the democratic society here in the US. He wants to put the working class people to where they will have to work all of their lives to support politicians, welfare, public housing, food stamps, obamacare, and any other liberal program that he dreams up! This country is in for a big change and it's going to be messy.

December 30, 2012 03:06 pm at 3:06 pm |

Paul

Dem plan sounds reasonable. That means republican will oppose. The republican have strict orders from Grover nordquist and their rich contributors to just say NO

December 30, 2012 03:07 pm at 3:07 pm |

sergio

No deal; as long as republicans and tea party nuts; the party of the plutocracy, the minions of the rich, and the enemies of the poor and middle class Americans, continue to oppose the middle class tax cuts, and demands cuts to Social Security, Medicare, and that the middle class sacrifice their standard of living, in order to safeguard their billionaires masters from higher taxes.

December 30, 2012 03:07 pm at 3:07 pm |

DGfromMI

I support the GOP to hold their ground...The spending has to stop...

December 30, 2012 03:07 pm at 3:07 pm |

Squigman

Hopefully the American people will see the light soon. The people (not the rich or corporations), the people never have had a friend in the republican party. They lie, cheat, and bully their way into office with the help of their minions on AM and Faux News, but they have never been, nor will they ever be a friend to the people. You just don't generate that much revenue to matter.

December 30, 2012 03:08 pm at 3:08 pm |

Mike

The GOP just can't get out of it's own way. They can't seem to get it through their heads that ALL taxes go up if nothing is done and that they *voted for* those tax increases becasue they refused to accept a larger deal a couple years back because they refused ANY tax increases at all and assumed they would win big this past year and could get *everything* they wanted. Well, they LOST. If they do nothing, the tax increases have their fingerprints all over them and any negative impact will be on their hands.

December 30, 2012 03:10 pm at 3:10 pm |

Jeff Cox

Republicans playing chicken. And the American people are going to lose. Voters need to remember this come 2014.

December 30, 2012 03:13 pm at 3:13 pm |

Reason2014

Congress, Just do your job or look out in 2014.

December 30, 2012 03:13 pm at 3:13 pm |

on StreetWise

Boehner won't give up on picking the pockets of the retired elderly, disability mets and poor... so over the side we go!

December 30, 2012 03:13 pm at 3:13 pm |

What?!?!

So Obama will sell out Social Security for unlimited borrowing ability.